How to Start a Home Bakery — Your Step-by-Step Guide

Two nights ago, I made chocolate-chip banana bread with some overripe bananas. Last night, I whipped up some delicious currant scones.

Baking is a hobby for me, but I’ve often thought it could be something more.

Maybe you’ve thought about turning your passion for baking into a small business.

If you’re wondering how to start a bakery business from home, this article will provide tips you need to begin. Let’s get started.

A Home-Based Bakery

The good news is that you don’t need a storefront to sell your baked goods — you can start baking treats and selling them from your kitchen. A home-based bakery is an excellent option for bakers who want to start small.

Think of what you bake well, and pick one or two items to focus on. Here are some examples of baked goods you can easily make at home:

• Cookies, brownies, and bars
• Muffins and scones
• Cakes and cupcakes
• Bread (savory and sweet)
• Pies and tarts
• Biscotti
• Dog biscuits

Are dog biscuits legitimate baked goods? They sure are!

I know a caterer who turned a failed waffle recipe into a thriving dog biscuit business. Inspiration happens in a flash, so you never know when a brilliant idea will reveal itself.

Home Bakery Laws

Before you begin the process of starting a home bakery business, you need to make sure that home bakeries are legal in your state.

You can visit your state’s Department of Health website to check the laws in your area. These laws, often called cottage food laws, are designed for small businesses. Cottage food laws may limit the types of foods you can make and the amount of homemade food you can sell.

Additionally, there may be limitations on where you can sell your products. If you’re planning to sell your baked goods at farmer’s markets, local farm stands, events, or online, be sure to check your local zoning laws to find out if it’s allowed.

You may not like the idea of sales limits, but don’t let that stop you from pursuing your goal. Most home bakers won’t hit their limits in the first years of business, so if you’re starting small, this likely won’t become an issue until your business grows.

Growth is a good sign that you’re going in the right direction!

Start a Baking Business

It’s safe to assume that you love baking and already do it well. If you’re often asked to bring a dessert to a dinner party or to supply the cupcakes for an annual event, your baked goods are likely tasty — if not downright irresistible.

Baking skills matter, but there’s so much more that goes into starting a home-based bakery. It requires research, planning, marketing, and more.

So before you turn on the oven, follow these steps to learn how to start a home bakery:

1. Create a business plan.

Think of your business plan as a recipe. If you have all the right ingredients and follow the instructions, you’ll end up with a successful home-based bakery.

Start with a mission statement.

Describe your business in a sentence. What items will you offer? What makes your business unique? The more specific you are, the better.

For example, instead of calling your business a home-based bakery, use language that more clearly defines your business intent.

You could advertise that you’re a home-based baking company specializing in custom cookie care packages. Now it’s clear what you’re baking and how you’re supplying it to your customers.

Once you know what you will offer, you can begin to think about other aspects of your business. Writing a business plan takes time, but it will help you think through your goals and objectives.

Use our free business plan template to help answer important questions such as:

• Who needs or wants your baked goods?
• How much will you charge for them?
• Where and how will you sell them?
• What equipment is required to begin?
• What funds are needed to start your business?
• How much money will you make in the first year?

Name your business.

The only thing more fun than baking may be coming up with a catchy name for your business — the more unique, the better. If you specialize in wedding cakes, you could call your bakery Honeymoon Sweets.

People love creative business names, but make sure it’s clear what you’re selling. You can explore names for your bakery with this free business name generator.

After you decide on a name, check that another bakery doesn’t already own it. If your business name is available, be sure to register it and obtain a Federal Tax Identification Number.

Define your target market.

It’s time to think about your customer. Your business plan should include a clear vision of your target market.

Do you want to sell your sweets to local customers? Or do you have your sights set on restaurants, schools, and companies? The more you define your target customer, the easier it will be to meet their needs.

There will always be a market for home-baked goods, but there also could be fierce competition. Look for the sweet spot to help your business attract more customers and stand out from the pack.

2. Get your business in order.

It’s important to define your business structure before operating your home bakery since it will affect how you pay taxes. There are a few ways you can establish a small home-based business:

A sole proprietorship is usually inexpensive, offers tax benefits, and is easy to form. The downside is that it doesn’t protect you from liability, so your personal assets are at risk if someone were to get sick from your baked goods.

A Limited Liability Corporation (LLC) is often the preferred way to set up a small bakery business since it offers a combination of tax benefits and liability protection for small business owners.

It may be helpful to seek advice from an accountant or financial advisor on how to start a bakery business from home. The business structure you choose will be the one that makes the most financial sense for you.

Either way, you should determine if you need to collect sales tax on your bakery goods. Contact your state’s tax or comptroller’s office for more information.

Licenses and permits — It’s time to find out if you need a license to run your bakery. Some states require both a business license and a food license ⁠— and possibly a permit — to sell baked goods from your home, while other states may not require a license or permit.

Your state’s cottage food laws will tell you if any licenses or permits are required. Be sure to check with your local governments — city and county — to learn if they have licensing requirements.

3. Get your kitchen in order.

It’s exciting to know that you could soon be selling your tasty treats to others. But before you start frosting those cupcakes, you’ll need to know that your home kitchen is in tip-top shape.

To avoid trouble down the road, keep these in mind:

Health requirements — Since you’re selling a consumable product, you’ll need to comply with local health codes and regulations for your home bakery kitchen. Some states won’t allow you to use your residential kitchen for commercial food production, so be sure you understand any restrictions.

Call your local Department of Public Health to inquire about the laws and regulations regarding the foodservice business. You may be required to take a state-approved course to obtain a food safety certification.

Even if your state doesn’t require it, you may want to take a food safety course to learn more about proper food handling, storage, and preparation techniques. It's helpful information to have, especially if your state requires you to pass a health inspection.

While a home kitchen inspection sounds intimidating, it typically isn’t as rigorous as a commercial kitchen inspection. Still, you’ll want to be prepared.

Here’s what your health inspector will likely be assessing:

• Do you have a clean, fully functioning kitchen space?

• Can you demonstrate how to sanitize your area and equipment?

• Are you storing your perishables at the proper temperature?

• Are your dry ingredients in sealed containers at least 6 inches off the floor?

• Do you separate your business baking ingredients and equipment from the ingredients intended for personal use?

The health inspector’s job is to ensure that your kitchen environment — and ultimately your baked goods — are as safe as possible. With some preparation, you should be able to pass your inspection without any issues.

Kitchen equipment — If you’ve been baking for years, you may already have a well-equipped kitchen. The question is whether it’s sufficient to start a home baking business.

Depending on your kitchen’s current layout, you may need to add equipment or make adjustments such as these:

• You may have to install shelves or create a pantry to separate your bakery food and equipment from your personal items.

• Your business may require you to add or update a sink, convection oven, or refrigerator.

• Your ventilation system or oven hood may need an upgrade.

• You may need to purchase more equipment such as a heavy-duty commercial mixer or a proofing cabinet.

Ingredients

Starting a home bakery requires a mind shift, including how you purchase certain items.

When you think about how much you’ll charge for a cake, you should factor in components such as time, ingredients, and supplies. For a home baker, time is money. You don’t want to waste time running around shopping for ingredients.

Instead of spending time and money at grocery stores, you can buy quality bulk baking ingredients online from wholesale retailers.

And speaking of ingredients, be sure to label your baked goods clearly. In addition to listing ingredients, you should identify which products are gluten-free, nut-free, and/or vegan.

4. Market your business.

Whether you’re selling fancy macarons or kitschy cupcakes, you need to let your customers know you’re open for business.

Here are some ways to get the word out:

Social media — One of the easiest ways to attract customers is via social media. Create a Facebook account. Set up an enticing Instagram page. Start tweeting on Twitter.

Post photos of your treats, and find ways to interact with your customers online. Your social media presence is a great way to highlight your offerings and gain attention.

Website — A website is an essential tool for your business. It’s where you can tell your brand’s story, share photos of your treats, or blog about your baking tips.

Your website should not be overly complicated, but it should include a menu (with listed ingredients), pricing, and information about ordering items.

Your community — Engaging in your local community is a great way to build relationships with customers and other small businesses. When you participate in local events and venues, people will be able to see and taste your treats so that the name of your bakery will be on everyone’s lips.

Looking for more information on marketing your home bakery business? Check out these helpful guides:

What are the Do’s and Don’ts of a Small Business Website?

Creating Consistent Facebook Content For Your Business Page

Word of Mouth Marketing: How to Grow Your Business

5. Future-proof your bakery.

When it comes to your home bakery business, it’s OK to start small. It’s better to offer a limited selection of goodies you can bake well rather than get overwhelmed by biting off more than you can chew.

Stick with the crowd-pleasers — You know your specialties, so don’t stray from your tried-and-true recipes. After all, these are the baked goods that got people talking in the first place.

Add items gradually — Once you’re up and running, you’ll likely get into a rhythm of baking and producing more quickly. It’s always best to wait until you’re operating efficiently before adding new items to your menu.

Stay creative — Baking is an art and a science, so keep experimenting. New flavors, decorative touches, and innovative packaging will keep your home bakery from getting stale.

Go with the flow — Like many small businesses, your home bakery will encounter ups and downs. On the positive side, you could become so successful that you outgrow your kitchen and need to hire extra help. Preparing for the unexpected, good or bad, is part of owning a business.

Why Business Insurance is Important for a Home Bakery

As a baker, you know that one missing ingredient can cause a cake to collapse. That’s why business insurance is vital. Without it, your home bakery business could suffer devastating consequences.

Follow these steps to ensure your home bakery business is adequately covered.

1. Don’t rely only on a homeowners policy.

If you’re operating a home-based bakery, you may think your existing homeowner's policy will offer you the protection you need. Think again.

Your homeowner’s policy likely has a business exclusion, which means it won’t cover a claim related to your baking business. So if your equipment breaks or your customer comes to pick up her cake and slips and falls in the kitchen, that could mean serious financial repercussions for you and your business.

Simply put, a homeowner’s insurance policy typically isn’t the right fit for your home-based bakery.

2. Understand your risks.

If you’re lucky, a batch of burned cookies may be the worst thing that ever happens in your kitchen. But unfortunately, that may not be the case.

When it comes to small businesses, accidents happen, and they can be costly. In fact, the average claim for accidental customer injury or damage is $30,000.

There are many risks you need to think about when running a home-based bakery:

• Your burned cookies could start a small fire in the kitchen.
• A customer could slip and fall when picking up an order.
• Someone could have an allergic reaction to your baked goods.

Cases like these could result in significant property damage or a potential lawsuit. Without business insurance, the costs relating to those incidents would come out of your pocket.

3. Get business insurance.

Unexpected events happen. But the right business insurance can provide financial protection for you, your bakery business, and your equipment.

The most common insurance for home-based bakers is general liability insurance. It provides coverage against costs associated with certain third-party accidents, third party property damage, and bodily injury (up to your policy limits).

Here are some examples of what general liability coverage can cover:

• Third-party bodily injury to another person
• Third-party property damage
• Personal and advertising injury
• Medical expenses
• And more

Getting general liability coverage for home bakers is fast and easy. And quote options for GL coverage from leading insurers can be as low as $25.95/month.* It usually takes just 10 minutes with our online quote tool.

Ready, Set, Bake!

When learning how to start a bakery business from home, there's a lot to consider. Don’t let that stop you from following your dream of becoming a successful home baker. There are plenty of good reasons to take the next step:

• You’re a talented baker who loves to spend time in the kitchen.
• Your baked goods are simply delicious.
• You have a unique product that’s wildly popular.
• You understand laws and restrictions regarding baking.
• You know how to market yourself and reach customers.
• You know how to protect your business.

If this sounds like you, you’re off to a sweet start. Now let’s get baking.

* Monthly payment calculations (i) do not include initial premium down payment and (ii) may vary by state, insurance provider, and nature of your business. Averages based on January - December 2020 data of 10% of our total policies sold.